Analysis of ONS survey data by Handelsbanken Wealth & Asset Management has found that twice as many workers see occupational or personal pensions as a safer way of saving for retirement than property investment.
More than half (57%) of retirement savers who are still working believe pensions are the most secure retirement saving method, compared with 25% who chose property and one in seven (14%) who opted for ISAs, stocks and shares and saving accounts, according to Handelsbanken Wealth Management & Asset Management’s analysis of the latest Government data.
Those relying on property as their biggest source of income in retirement are even fewer – just 11% of those who are not retired expect it to be their most important source of income when they stop working. That compares with 46%, who think their main income will be from their occupational or private pension.
Some 23% believe their State Pension, benefits, or tax credits will be their largest source of income, while 12% think it will be their savings, investments, earnings, income from a business or sale of a business.
The data shows the number of people saving into pensions has risen to a new record high of 21.8 million after an increase of 40% – or 6.1 million – in the past decade, with most of this growth coming from new savers into defined contribution pensions.
Auto enrolment, which was launched in 2012 and made enrolment into workplace pensions automatic, has boosted the number of defined contribution pension holders to 9.9 million from 2.8 million, while the number of savers with defined benefit – or final salary – schemes has grown by 1.5 million to 8.8 million.
That has cut the number of people below State Pension Age who do not have a workplace or private pensions by 14% or 2.6 million in a decade, but there are still major issues for those who do not contribute. Nearly a third (29%) say they have too many other expenses, bills and debts or simply cannot afford a pension, while more than half (54%) say their income is too low, they are not working, or are still in education.
Christine Ross, Head of Private Office (North) and Client Director at Handelsbanken Wealth & Asset Management said:
“It’s great to see confidence in pensions growing, with people rating them as the best way to save for retirement. More importantly, the number of people who are saving into pensions is increasing.
“It’s vital to use all of the tax-efficient options available to create a flexible retirement plan, as well as trying to start saving as early as possible, with the earliest savings having the longest period of time to grow.
“Employers are now obliged to make contributions for their staff, which helps many savers get on the retirement planning ladder. Some company pension schemes even offer additional ‘matching’ contributions if the employee pays more than the minimum. That can be as good as a pay rise and the money will grow, tax free, in the pension scheme for many years.”
Company pension schemes of course do not apply to the self-employed – and Handelsbanken Wealth Management & Asset Management’s analysis shows there is a greater reliance on property for retirement among those who work for themselves.
More than two-thirds (69%) of over-55s below State Pension age own a property, but that rises to 81% among the self-employed in that age group. And 25% of those that are self-employed in this age bracket own other properties in addition to their home compared to just 15% of those who are employed.
Handelsbanken Wealth & Asset Management analysed Government data from the ONS Saving for retirement in Great Britain dataset.